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Tuesday, February 5, 2013
"I think copper has at least 50% upside from today's price..." legendary analyst Adrian Day told me recently.
"I wouldn't be surprised to see the price double by the end of the decade."
When Adrian talks commodities, I listen... He's written his Global Analyst newsletter for over 25 years. At one time, it was one of the most popular investment letters in America, with over 60,000 subscribers. And for a decade now, he has focused on commodities for customers of Adrian Day Asset Management.
Today, Adrian has his sights set on copper... Over coffee last week, he explained why copper prices could soar. He also shared his favorite way to profit from it. Here's the story...
Adrian believes there's a big opportunity in copper. It's a simple story of supply and demand...
"In recent years, we've seen a record copper price and record demand. Yet production has actually declined," Adrian told me. "Output from Escondida, the world's largest producer, is down 25% over the last five years."
Adrian explained there are currently 82 new mines set to come online by 2020. "About 80% of them had their start dates delayed in the past 12 months. The future supply of copper is anything but certain."
With uncertain supply, a "pop" in demand could easily send copper prices soaring. And Adrian sees China as an obvious source of continued demand growth...
By 2020, world copper production won't even meet China's demand.
Adrian's story here is simple. It's Economics 101.
With demand exploding and supply decreasing, the copper price has only one way to go... higher. Again, Adrian says prices could double by 2020.
As investors, we have one simple way to profit from a rising copper price. Longtime readers are familiar with this opportunity... When copper prices increase, shares of Freeport-McMoRan (NYSE: FCX) explode. Take a look...
For example, shares of Freeport soared from below $10 to near $60 in about two years (roughly 2009 through 2010). When copper takes off, shares of Freeport can go nuts.
Freeport is currently a "buy" in our True Wealth newsletter. And Adrian says the stock is one of his top ideas right now. It's easy to see why...
The stock is dirt-cheap. As I write, it trades for just 7.5 times next year's earnings. The company also pays a 3.5% dividend.
The company is cheap today because of a recently announced acquisition of Plains Exploration & Production (NYSE: PXP) and McMoRan Exploration (NYSE: MMR). Freeport shares fell 16% on the news. But Adrian believes this offers a fantastic buying opportunity...
Even with Freeport's diversification into oil and gas, I expect the company to continue trading in-step with copper. If Adrian's forecast is correct, that could mean enormous gains like we have seen in the past with Freeport.
Today, we have an opportunity to get in cheap. It will surely be a bumpy ride. But long-term, both Adrian and I expect big gains in shares of Freeport.
A MAJOR NEW HIGH FOR GOLD
Gold is still soaring... and hitting all-time highs... if you're in Japan.
Longtime readers know that since we started publishing DailyWealth in 2005, we've been outspoken bulls on gold. (We were gold owners and gold bulls years before that.) Since then, we've published hundreds of essays on the right ways to own it. We even published a book on the stuff.
We've always encouraged readers to see the gold bull market as not just an American phenomenon... but a global one. While most folks think only in term of U.S. dollars, gold is rising against all paper currencies. It's a huge trend to be aware of.
For example, most folks know that gold priced in dollars is well off its 2011 high. But it's important to pay attention to what's happening over in Japan... which is the world's third-largest national economy. Japan is an extremely important "cog" in the global economic engine. Its leaders are debasing the currency (the yen) to "jumpstart" its economy... which is causing gold to soar to new highs in yen terms. In every language, it's still a big bull market in gold.
– Brian Hunt
In The Daily Crux